Financial Formulas - Category Liquidity ratios

Liquidity ratios are financial metrics that assess a company's ability to meet its short-term financial obligations. Common liquidity ratios include the current ratio and the quick ratio, which measure the company's capacity to cover its current liabilities with its current assets. These ratios are crucial in finance to evaluate a company's short-term solvency, ensuring it can manage day-to-day operations, honor its debts, and handle unexpected financial challenges.